Core sectors' growth bounces back in October

On a month-on-month basis, output was 7.3% higher in October compared to September’s seven-month low print of the Index of eight core industries

Output from India’s eight core sectors grew 7.5% in October, picking up pace from the revised 4.5% growth estimate for September, with all sectors, except crude oil, recording positive growth.

On a month-on-month basis, output was 7.3% higher in October compared to September’s seven-month low print of the Index of eight core industries. These sectors account for 40.27% of the weight of items included in the Index of Industrial Production (IIP).

Steel production growth hit an 11-month low of 0.9%, marking a streak of four successive months of decelerating growth. Compared to September 2021, however, output had grown by 3.7%.

Crude oil output, which has been consistently shrinking for several months now, dropped 2.2% compared to October 2020, but grew 2.85% on a sequential basis from September 2021.

Year-on-year growth in fertilisers production remained positive for the second month in a row, but only just at 0.04%. However, compared to September, fertilisers output grew by a healthy 8.2%.

Natural gas and refinery products recorded a healthy growth of 25.8% and 14.4%, respectively, but largely thanks to the base effect of negative growth in October 2020 of 8.6% and 17%.

Coal and cement production recorded a growth of 14.6% and 14.5%, respectively. Electricity production rose 2.8% year on year, but fell 0.8% compared to September 2021.

“The divergence in the double-digit growth of cement with the marginal rise in steel is reflective of the cutbacks in auto production, whereas construction activity appears to be healthy,” said ICRA chief economist Aditi Nayar.

The overall growth of 7.5% is ‘higher than expected’ and enthusing, even though it isn’t broad based, she pointed out, attributing the acceleration in growth to petroleum refinery products reflecting rising mobility, and the ramping up of coal as well as cement and electricity output.

While the core sector growth has accelerated and the festive season trends were broadly positive, the 22% contraction in auto output is likely to push the October 2021 IIP growth to below 2.5%, Ms. Nayar reckoned, adding that core sectors’ growth is also likely to slip back under 5% in November.

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